Medicare premium will go up $10 a month

The prescription drug benefit that starts Jan. 1 will help offset next year's Medicare Part B hike, the Bush administration says.

By Associated Press
Published September 17, 2005

WASHINGTON - Senior citizens and the disabled will have to pay a monthly Medicare premium of $88.50 next year for doctor's visits and other services, a $10.30 boost in the fee.

The 13.2 percent increase in premiums for Medicare Part B was in line with what government actuaries had been predicting.

Officials with the Bush administration, however, pointed out that the prescription drug benefit that begins Jan. 1 will ease some of the pain of the increase.

Under the program, millions of low-income Americans will have their prescription drug costs covered almost entirely, and many other beneficiaries should see their out-of-pocket costs for prescription drugs decrease.

"Next year, people on Medicare will be getting much more in benefits than they had previously received," said Herb Kuhn, director of the Center for Medicare Management, part of the Health and Human Services Department.

Beneficiaries, through their premiums and other fees, pay about a quarter of the expenses for Part B, or supplemental insurance. Taxpayers pick up the other 75 percent.

Kuhn said an increase in the number and intensity of services that doctors provide is driving the increase in the premiums. The volume of physician services grew at a rate of 6.3 percent last year and is expected to grow 5.6 percent this year. The volume of hospital outpatient services has grown at a similar rate.

Kuhn said the Centers for Medicare and Medicaid Services did not have a good understanding of whether the increasing volume of lab tests, office visits and the administering of drugs by physicians was necessary.

"We're still trying to understand how much value we're getting for that," Kuhn said.

CMS officials say the rapid growth in services shows the need to move away from a reimbursement system that pays simply for more services, regardless of their impact.

The American Medical Association, in press releases issued earlier this year, defended the increase in services by noting that conditions once requiring hospitalization are now routinely treated in a physician's office at a lower cost to the government and patients.

"Americans are living longer than ever, more are entering Medicare, and chronic disease continues to increase, which naturally leads to an increased need for physician services," Dr. James Rohack, a member of the AMA Board of Trustees, said at the time.

For the nearly 42-million Americans on Medicare, the part B benefit is voluntary. Premiums for the benefit increased 17.4 percent in 2005, and 13.5 percent the year before. Most senior citizens have the premium deducted from their Social Security check. It's not yet known how much the coming increase will eat into that check, because officials have not yet announced what next year's cost-of-living increase will be for Social Security.

For 2005, about 40 percent of the average cost-of-living increase went to pay for the increase in Part B premiums.